The price elasticity of demand is always positive, as is the price elasticity of supply. Is the cross elasticity of demand always positive? Explain your answer
What will be an ideal response?
No, the cross elasticity of demand is not always positive. The cross elasticity of demand is positive for goods that are substitutes and negative for goods that are complements. Hence the sign of the cross elasticity of demand indicates whether the goods are substitutes or complements.
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Which of the following is the least likely to result from an advance in technology?
A. suppliers offering a larger quantity than before at each given price. B. suppliers offering the same quantity as before at a lower price. C. a leftward shift of the supply curve. D. an increase in supply.
Homer and Marge both enjoy lasagna and wine. Homer's utility function is given by U(L,W) = 12L + 4W. Marge's utility function is given by U(L,W) = 2L + 2W. In each function, L stands for plates of lasagna and W stands for glasses of wine. Would Homer and Marge agree to a trade in which Homer gives Marge a plate of lasagna in exchange for two glasses of wine?
What will be an ideal response?